Search

You are here

Policymakers can gradually trim the growth of benefit programs and boost future tax revenues by using the “chained” Consumer Price Index (CPI), rather than the official CPI, to adjust various federal benefits and provisions of the tax code to account for inflation, our new report explains.

Compromise didn’t use to be a dirty word. With revenue increases a major sticking point in the congressional “supercommittee’s” effort to cobble together a budget plan, we looked at past deficit-reduction packages and found that revenue increases were part of nearly every major package in the 1980s and 1990s, under Democratic and Republican administrations alike.

I have already noted that government spending in the United States (as a percent of gross domestic product, or GDP) is below average for a developed country, using data from the Organisation for Economic Co-operation and Development (OECD). Those data also show that government revenues in the United States are low by international standards.

The Washington Post says that because Social Security will pay out more in benefits this year than it collects in payroll taxes, the program has gone “cash negative” and will add $46 billion to the deficit in 2011. This claim, which we’ve dealt with before, ignores a huge source of income to Social Security — interest on its portfolio of Treasury bonds — to make it sound like the program faces imminent crisis.

A House Ways and Means subcommittee will hold a hearing tomorrow on Supplemental Security Income (SSI) benefits for disabled children to consider the program’s future. SSI provides monthly cash assistance to people who are disabled, blind, or elderly and have little income and few assets; in September 2011, 8 million people collected SSI benefits — including 1.3 million children under 18.

Here are some important things that lawmakers should know about SSI for disabled children:

It’s official: recipients of Social Security (as well as SSI and certain other programs) will get a 3.6 percent cost-of-living adjustment (COLA) in January 2012. For most enrollees, higher Medicare premiums will offset some of that increase, but other enrollees will actually see their premiums decline. COLAs preserve the purchasing power of elderly or disabled beneficiaries and are a crucial part of the safety net — something policymakers should recognize as they debate tying benefit levels to a different measure of inflation.

Chris Edwards from the Cato Institute generated some buzz recently by stating at a Joint Economic Committee hearing that government spending in the United States is 41 percent of gross domestic product (GDP). Although that’s right — by one yardstick for one year — it exaggerates the situation. Edwards used data from the Organisation for Economic Co-operation and Development (OECD), which makes several adjustments to the U.S. data that pump up the government’s percentage from levels we’re used to seeing. And Edwards picked a year when that figure is unusually high because of a weak economy.

Up to 4,600 impoverished elderly or disabled refugees will lose their Supplemental Security Income (SSI) benefits on October 1, when a temporary provision of law expires. Several hundred more will lose their benefits each month thereafter. Congress should act quickly to avert the severe hardship that this small but vulnerable group will face.

As my colleague Jim Horney has explained, the Congressional Budget Office’s new budget estimates show that deficits and debt are on a downward path over the next decade if we simply follow the laws already on the books. That means there’s no need to impose large spending cuts in the near term that go beyond those in the Budget Control Act, which implemented the recent debt-limit deal.

Social Security’s disability-insurance program is forecast to run short of money in 2018, more than six years from now, and policymakers can plug the hole for several decades by reallocating some taxes from the related old-age program as they have done in the past. But that’s not the impression you’d get from some alarmist reports. “Social Security disability on verge of insolvency” blares a Fox News story, a theme echoed by other outlets (see here and here).